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Christina Cavallo
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I found this study to be an interesting one as it clearly exemplifies the importance of the ways in which we measure poverty. The most outstanding result of this study is that aid is associated with lower multidimensional poverty but not with lower income poverty. Specifically, they found a 1% increase in the average amount of aid received from the U.S to be associated with a .82%, .36%, and .64% in education, health, and living standards respectively, or a .61% reduction in the MPI on average. The relationship between aid and poverty measured by the poverty gap and headcount ratio doesn’t seem to be statistically significant, but the relationship between aid and multidimensional poverty with deprivations in health, education, and living standards, is statistically significant. This reveals the we need to be careful in the way in which we look at the impacts of poverty alleviation efforts. Just because aid may not decrease income poverty does not mean that it is not beneficial. Reductions in living standards, health, and education, and not just income, is an important indicator that aid is valuable and should be given. This discussion also reminded me of Amartya Sen’s framework of looking at capabilities as an important indicator of quality of life and poverty. I would not want someone to think that, since aid does not decrease income poverty, that we should not be giving it. It is important that we care about, and try to better, individual’s qualities of life.
Toggle Commented Nov 12, 2020 on Last Post of the Year at Jolly Green General
To be completely honest, I had trouble with this paper. I took away that interest rates in advance industrial countries such as the US have a powerful impact on the state of global financial markets. These interest rates determine the pricing of external debt as well as the capital flows to emerging markets. This analysis “confirms that global credit conditions have had an important impact on the market for developing country debt”. This paper goes beyond previous studies that hide the underlying relationship of the link to emerging-market spreads and the U.S interest rates. They explain that this is due to the U.S interest rates affecting not just the price of new issues but the the volume and composition of international lending as well. As this paper states, the interest-rate effect has been overlooked due to the differentiation of supply and demand responses by region as well as the fixed and floating-rate issues. The tendency for poor credit risks to exit the market during high U.S rates hints that many fail to control for the thought that there is no positive association between emerging-market spreads and US interest rates as spreads dip downward. I had trouble with the language and the financials within this paper, so I am looking forward to getting a better understanding of it tomorrow in class.
Toggle Commented Nov 5, 2020 on For Friday's Discussion at Jolly Green General
Adding on to what we have been talking about in class, it is evident that an increase in investment in human capital increases lifetime earning potential - which can help alleviate poverty now as well as reduce poverty in the future. This study seemed to have conducted an extremely thorough analysis of conditional cash transfers with their analysis on Progresa in Mexico. Given that this study contains “the first estimates of the long-term impacts of an influential and nationwide CCT program on a generation of youth who have effectively grown up with it”, it is evident that this study looked at effects that were in need of analysis and are in need of further analysis. The extent to which Progresa reached its desired population was impressive - 6 million families or about 1/4 of all families in Mexico and a 97% rate of participation for families who were offered the program. One particular aspect that stuck out to me was that the grant, which represented about 2/3 of Mexico’s minimum wage, was given to the mother of the family (except upper-secondary school scholarships). This reminded me of our previous discussion about how women tend to be more monetarily responsible. The fact that they acknowledged that there may not be a rise in income in places where school quality is lacking reminded me of Kremer’s realization of the impact that intestinal worms had on children’s education. I thought it was interesting that genders experienced different results - another topic that we have been discussing. Progresa had led to growth in both labor force participation and education for females and “estimated effects on labor income are positive for both sexes but statistically significant only for women”. Female labor force participation increased participation by more than 1/4 and female labor income by more than 1/2. I think other countries should look at Mexico’s Progresa as this paper “provides new evidence that the intergenerational benefits of CCTs may be as large or as larger than current poverty effects.”
Toggle Commented Oct 29, 2020 on For Friday's Discussion at Jolly Green General
It was no surprise to me to read that the paper concluded that the “returns are highest for primary education, the general curricula, the education of women, and countries with the lowest per capital income” and “that primary education continues to exhibit the highest social profitability in all world regions”. Considering that there isn’t much empirical evidence on the social benefits of education, and considering that the social rate of return estimates are usually just based on the monetary costs and benefits of education, it is obvious that these benefits are lower than what they actually are. There needs to be an extensive effort to look at the social benefits beyond just money. There are far more important social benefits such as the saving of human life and the bettering of human wellbeing. This, I would argue, is more important than just money. One aspect of the paper that I found to be especially interesting was the discussion of credential effects vs earnings premium. The difference between the idea that the increase in earnings are due to increased productivity from schooling (human capital) vs the idea of the screening hypothesis that employers select workers with higher qualifications to reduce their risk of hiring someone with a lower capacity to learn seems to be difficult to differentiate. It makes sense that people would be more productive if they were more educated. It also makes sense that employers would choose workers with higher qualifications to reduce their risk of hiring someone with a lower productivity rate. Layard and Psacharopoulos found no support of the screening hypothesis as they differentiated between the weak version of screening when hiring and the stronger version of screening after years on the job. I am curious as to why this data contradicts other evidence that shows the earning gap between more and less educated workers increases over time. I think it is important to note that just because someone is less educated does not mean that they do not have the ability to have high productivity. From this, I think it is also important to realize the importance of making education accessible to everyone and not just those who can afford it. Another aspect that I think deserves attention is the idea that, because of modernization, it is extremely difficult to compare our future to our past. Relying on the past to assess current investment decisions requires too many assumptions that do not hold true. Wage patterns have changed as has the stability of the economic environment. In this regard we also need to consider the race between technology and education - and technology’s fast pace. In all, I think we should learn from Chile’s “voucher school” and Colombia’s lottery system and understand that spending on human capital is a good investment.
Toggle Commented Oct 22, 2020 on For Friday's Discussion at Jolly Green General
Duflo’s paper brought up many interesting aspects of gender inequality and economic development. One of the most important points of this paper, I would argue, is the argument that “equality between women and men is a desirable goal in itself”. Yes, equality can have positive effects on society and accelerate development, but equality is intrinsically valuable in and of itself. One thing that surprised me was that Ali et al. found that “there is no difference in the ways that girls and boys are treated by health practitioners once they reach the facility”. I don’t know the literature or have any real evidence to support my thinking, but I have heard conversations about unfair treatments that take place within doctors offices. I hope that this isn’t the case, but I would find it surprising if parents had biases towards which child gets treatment and doctors who are living in the same society as these parents didn’t have similar biases as to which child gets better treatment. I also thought the topic of technology was interesting. In terms of sex-selective abortion and technology that enables that to even exist, I am curious to see if further technological advances will increase this inequality. When I was reading about this, I began to think about genetically altered embryos. Perhaps this technology would result in even more families choosing to have girls if they have the power to do so. Also, the discussion of implicit bias was disappointing as well as interesting. It is difficult to make changes to problems that are so deeply, and implicitly, ingrained in us. While both men and women have these implicit biases, women are facing more of the repercussions. Spencer, Steele, and Quinn concluded that “girls have accepted and internalized the bias… and give up”. As the VP debate took place last night, I think it is especially important right now that we realize how different the perceptions are of men and women in political power. As the essay points out, many experiences have shown that, “holding performance constant, women leaders are evaluated more negatively than male leaders.” As seen with Kamala Harris, she has to continually stand up for herself and be overly cautious of making any kind of mistake. I think the most ironic example of the inefficiency of gender inequality is Udry’s study of fertilizer use. In Burkina Faso, women have ownership of their own plots within their marriage, but couples purchase communal inputs, such as fertilizer, together. It is evident, though, than men’s plots are much more productive than women’s plots. This is due to more fertilizer used on men’s plots. The effectiveness of using fertilizer, however, declines with how much is used. So, it would be better to use a little fertilizer on both women’s and men’s plots. Overall, this is not what is happening even though “household producing might increase by 6% just by reallocating the same amount of fertilizer and labor.” This is just one example of the inefficiency of gender inequality and clearly illustrates “the fact that women have insecure property right leads to sheer waste and literally makes families poorer".
Toggle Commented Oct 8, 2020 on Duflo for Friday at Jolly Green General
I think that one of the most important aspects of the article was the idea of how simple and intuitive economic theory and policy can really be. The realization of the simplicity behind this economic theory makes the poor policy decisions even more frustrating. The founding fathers “intuitively recognized that the net social benefits exceeded the need private benefits”. The limitations that a fully private education market would result in a small economic pie that would not benefit those who could not participate in this private market as well as society as a whole. Yet those in power did not do anything. Wade supported the bill because, “..the thoroughly educated, being most sure to educate their sons, appeared to be perpetuating a monopoly of education inconsistent with the welfare and complete prosperity of the American institutions…”. Epplin then continues to explain that “the class distinction was very clear as well as the intuitive understanding of the external consequences of restricting higher education.” The upper class wants to keep themselves elevated whether or not it is beneficial for the country and society as a whole. This is not fair, nor is it morally right. Although many oppositions to Turner’s plan had to do with the idea of wasting public lands and the funding mechanism behind it, a reasonable opposition that I could see being a difficult hurdle to cross would be the fact that “college would enable sons to avoid the practical work that they should be doing on the farm.” This reminded me of the conversation of how it can be difficult for lower income countries to change their habits due to the risk factor. Although what they are doing may not currently be the most effective, those individuals know that their current practices work, and their livelihood depends on it, so changing would be of too high a risk. I think that in order to combat this, it would be beneficial to propose a type of insurance coverage that could mitigate the risk of losing hands and productivity on the farm. In initially proposing this initiative, I think it would have been beneficial to look at how exactly they were going to get individuals to college and invest their time in schooling while leaving work at home. I would be interested to learn more about this and the details of how individuals were actually able to make this time investment in school and away from their work.
Toggle Commented Oct 1, 2020 on For Friday's Discussion at Jolly Green General
Quiggin’s piece was more of a hopeful read than The World Bank’s Executive Summary. Something that stood out to me from the Executive Summary was the discussion of the potential problems with import oriented food systems. The summary states that there is a possibility for “some regions to become over-dependent on food imports and thus more vulnerable to weather events”. I had not put much thought into weather events disrupting people’s food availability before, but I can see how this could potentially be very problematic. Thinking of this on the larger scale, it is easy to see how a climate affecting disruption in one area creates a web of problems in other areas throughout the world, and this idea is carried throughout the summary. The butterfly effect is evident when it comes to climate change, and it shows how interconnected the world truly is. When soybean production was brought up, it reminded me of our discussion in class with China’s growing economy leading to an increase in demand of pork which lead to the increase in demand of soybeans and the deforestation that is brought along with that. Quiggen’s statement that when looking at the consequences of global warming, “that the full scope of damage is almost impossible to project” reminded me of our discussion in class about how it is difficult to project future generations wants and needs. It is difficult to project both damage and characteristics of the future. Keyne’s proposal that “within a few decades, with the right use of technology, we could achieve a society where people worked because they chose to rather than out of material necessity, a society in which working hours averaged 15 per week with no decline in quality of life” is something that sounded really appealing and I would doubt there would be much, if any, opposition to this. The means of getting there, however, would require the more difficult task of convincing people to change in behavior. The discussion about Australia’s star rating reminded me of the American’s LEED certification of "green buildings and communities". I took a class last year about W&L’s efforts to get building’s LEED certified, but if I had not taken this course, I don’t think I would know about LEED or about W&L’s efforts to be more sustainable. I think if we make sustainability more of a staple in everyday life, and something that could be associated with an “award”, I think this would help change societal behaviors and wants. I find a lot of hope in Quiggen’s opinion that it is a question of “will we” and not “can we”. I think that if more people thought about mitigating climate change in this way, we would have more willpower and hope to make lasting changes.
Toggle Commented Sep 24, 2020 on Readings for Friday at Jolly Green General
One thing that really stuck out to me from the article, that I have different opinions about, was the role that the Chaebols played in the economic development of South Korea. I think it is important to be wary of government control, but the initial “big push” of the government with the Chaebols led to obvious development. Seth stats that South Korea “poured credit into a few companies to develop industries target for development”. These initial family owned businesses ended up growing to “dominate the economy”. This government intervention got things moving, encouraged competition, and prohibited monopolies. The horizontal expansion of these chaebols also really stuck out to me. I would not expect the “Lucky-Goldstar”, a major toothpaste manufacturer, to become one of “the world’s largest consumer electronics firms”. The article states two fundamental changes that took place in South Korea that contributed to their economic takeoff: their expansion of education and their land reform. From 1945 to 1960, South Korea went through a rapid expansion of education that lead to increasing the enrollment in primary schools by 3x, increasing the enrollment in secondary schools by 8x, and increasing the enrollment in higher education 10x. By 1961, South Korea “had the best educated work force of any country with comparable income level.” This reminded me of a couple of theories we have been discussing in class. It reminded me of W Schultz’s idea of investing in people which arose around the same time of this increase in education. Even though this theory was formulated a little later, it also made me think of Kremer’s O Ring model and the idea that more efficient people working together can lead to overall more efficiency. The land reform that took place is something that led to more equality within the country. The limitation of property holdings to 7.5 acres led to the top 6% of landowners only online 18% of land (from the top 3% owning 64% 12 years earlier). This is something that you don’t see in the US. One thing in the article that I do have a question about is Seth’s statement that the “lack of social welfare safety net encouraged high rates of savings.” The thought process behind this makes sense to me because if you don’t have something to fall back on, you are going to be more likely to save. The reality of this statement, however, does not make sense to me. We have been talking in class about the people who need safety nets don’t really have the means to save. People in need of a safety net tend to not be able to save money because they need to spend their money on essential needs such as food, shelter, clothing, and utilities. So, I don’t quite see this statement as a reality.
Toggle Commented Sep 17, 2020 on Miracle on the Han for Friday at Jolly Green General
I thought that this paper was a nice compliment to what we have been discussing in class in regard to the problems that arise with making assumptions and translating models into the real world. I think the fact that Krugman acknowledged and respected Hirschman’s work made his argument stronger and made it more likely for his readers to be willing to open their ears. Krugman stated that Hirchman’s “intellectual strategy” was “understandable but wrong response” to economic development, but he thought that “the very brilliance and persuasiveness of the book made it all the more destructive”. The acknowledgement of the positive aspect of Hirschman, I think, made Krugman’s argument stronger. I thought the discussion of the mapmaking was really intriguing. It would make sense for an increase in knowledge to correlate with increase in accuracy of the maps, but as discussed in the paper, this was not a true assumption. The increase in accuracy and knowledge available to make maps “raised the standard for what was considered valid data” which led to a lag in the art of mapmaking. This advancement ultimately led to better maps in the long run, but it wasn’t a linear process. I think this analogy made it easier to understand what happened with economics from the 1940s to 1970s. I also think that this is a good example of the potential to be overconfident and almost blind with knowledge and the danger of not being able to look for or realize one’s flaws or mistakes. I think that the most important thing I took away from this paper was to be careful with models. As shown with Fultz’s dish pan, you cannot assume the model tells the whole story. For example, Lewis’s surplus labor concept disregarded economies of scale so theorists could have “something they could model using available tools”. Also, with Rosenstein Rodan, economies of scale and dualism are a key component to making the model work, yet it is difficult to know if these assumptions hold true in reality. Both readers of economics and economists themselves should be aware that it is easy to make “untrue simplifications” when using models. Instead, when using models, people should be “self conscious — to be aware that your models are maps rather than reality” and to be "self aware" rather than "sleepwalkers".
Toggle Commented Sep 10, 2020 on Krugman for Friday at Jolly Green General
I walked away from this article learning that institutional barriers have a heavier impact than TFP has on country growth. The study found that institutional barriers account for “more than half of the economic growth in fast growing and trapped economies and for more than 100 percent of the economic growth in the lag behind countries”. More than half seemed like a significant amount to me, but when I continued to read that it accounted for more than 100% in lag behind countries, it was obvious that this barrier holds a lot of power. I wasn’t surprised about the factors that they stated led to lack of economic growth - unnecessary protectionism, government misallocation, corruption, and financial instability - since all of these factors are heavily related and are commonly associated with struggling countries. Something that stood out to me as I was reading the article was the discussion on agriculture based economies and the problems that arose from too much dependence on these cash crops. Specifically in regard to the example of Côte d’Ivoire, the article stated that the problem of their economy “was caused by its dependence on cocoa production”. This reminded me of discussions we have been having in my Environmental Studies class. We have been talking about the importance of biodiversity and the security that it provides as, say if one crop is hit with a problem, others can make up for the unexpected event. When I read about Côte d’Ivoire, the concept of diversity as security in the environment came to mind. As it is true in the environment, too much reliance on one thing is risky, and it is true in economies as well.
Toggle Commented Sep 3, 2020 on Reading for next Friday at Jolly Green General
In the reading, Sachs clearly points out the strengths of the MDGs that the SDGs will incorporate as well as the weaknesses of the MDGs that the SDGs will learn from. Rather than starting completely over with new goals and new tactics, building from the past is a more effective way of moving forward. I think the fact that we are truly learning from the past and building upon it with the SDGs is a huge step forward in and of itself. The MDGs are easy to state and explain, they are moral and not legal commitments, and they incorporate practical measures that can be adopted. On the other hand, however, they have no intermediate milestones, they need more accurate lifeblood data, they need the private sector to be more engaged, and they need societies to invest in their success. I thought that the incorporation of intermediate milestones was an interesting addition to the SDGs because although that the MDGS have goals and aspirations the they want to reach, it would be more effective and easier to stick to them if there were steps in between the start and the finish line. When talking about goal setting in general, it is important to not just state a goal, but to discuss and think of ways in which you will reach your goal. It is difficult to reach your end goal without reaching smaller ones along the way. It is also clear that the SDGs need a global approach if they are going to solve the problems that they want to address. In regard to Sachs’ discussion about voluntary financing mechanisms, I am slightly confused about the ways in which the SDGs will combat this. Sachs says that the MDGs relied on voluntary financing mechanisms such as foreign aid outlays voted by each parliament. Through this, however, only some countries held true to their promises to give .7% of their GDP. Sachs states that the “SDGs should be more focused and realistic with regard to financing than were the MDGS.” Rather than relying on “aid voluntarism” where countries choose their individual aid promises, the proposal is for countries to agree in standards of financing such as quotas and assessments related to national incomes. I don’t completely understand how going from countries choosing their own aid promises to agreeing in standards of financing will eliminate the problem of countries not meeting their set finance aid. Since the MDGs and SDGs are not legally bounded, can this be ensured that countries will abide by the agreement? Sachs states that legally binding commitments are “regarded as the gold standard of international diplomacy, but the number of years that are often invested in reaching legally binding treaties on sustainable development are unlikely to counterbalance the heavy transaction costs and delays” and that “they are often ignored in practice because of the absence of effective enforcement mechanisms”. If there is no legal bind, how can the SDGs avoid countries not staying true to their stated aid. Even if the amount of aid is not set by aid voluntarism but rather by quotas, can’t countries still not hold true to these numbers?
Although I have learned a lot this semester, one thing that has particularly stood out is the concept of “it depends”. Besides having learned that saying these two words will get you half of the answer, I have learned the truth behind it. There is always two sides of the story. When talking about the differences between people - gender, race, socioeconomic status, etc - I think that this phrase is especially important. While one action can create a great benefit for one group of people, it can a cause great misfortune for another. A vivid memory I have from class is when you turned the lights off and then back on. You pointed out that while we were benefitting from the electricity, a child in West Virginia was suffering from a cough because of the coal burning. If someone were to ask you a simple question like: “are lights in a classroom a good thing?” most people would respond with a resounding “yes”. In reality, however, it truly does “depend”. From your class, I have learned that this answer holds true for even the simplest of questions, and I am grateful to have learned this from you. Things are never as simple as they seem to be, and from your class I have learned to try and see the simplest of things from multiple perspectives that may come to multiple conclusions. This also has made me realize how my actions have effects on other people even if its not happening right in front of me - like turning on the lights. I am grateful to have learned things about graphs, models, and economic concepts, but I am especially grateful to have learned lessons that go beyond the textbook from your class. Thank you!
Toggle Commented Apr 22, 2020 on ECON 100 Final Exam at Jolly Green General
The article mentions how most Americans own little to no stock and that their main asset is their home. I understand why this could lead to the scary statistics of the gaps, but could you elaborate on why this is the case? Is it just because these groups have less money to put into investments? Would it be better for people to start buying stocks even if they don't have much money to begin with? The article talks about the increase of inequality from 1980, but could you elaborate on what lead to this? It mentioned that our medical system is expensive/inefficient which causes the gap of health and that sharp cuts in states' spending on higher education leads to the gap of education, but does the gap of income have a root cause or is it just a result of an accumulation of many different policy choices?
In this troubling time it makes sense that we need "disaster relief, not economic stimulus". I thought that his analogy of how we were entering a "medically induced coma which some brain functions are deliberately shut down to give the patient time to heal" was an interesting outlook. I get why investors would want to "pile into government bonds", but I'm not totally sure how government bonds work in their entirety. Could you elaborate on this some? I also understand why the government wants/needs to borrow money, but could you further elaborate on federal borrowing and how the real interest rates are essentially negative?
Toggle Commented Apr 2, 2020 on ECON 100: The Corona Coma at Jolly Green General
I agree in the importance of the global co-operation that Harari brings up to fight this virus. I think that his comment about allowing travel, however, was an interesting viewpoint. I can see why the travel and transfer of doctors could be beneficial due to their necessity of treating the virus and the assumption that they would stay in a certain area once in a country, but I think the inclusion of "journalists, politicians, and businesspeople" wouldn't be of aid. With today's technology, I feel like those professions can do a lot without being there in person. Yes, maybe with special screenings the travel of these groups could be possible without spreading the virus, but I think the complexity behind it would be immense and it could take away the focus of stopping the spread and caring for those suffering.
Toggle Commented Mar 31, 2020 on ECON 100 at Jolly Green General
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Mar 31, 2020